Optus wary of NBN deal on network

Optus is holding off from a deal to transfer customers from its cable network to Labor’s national broadband network until it hears details of new legislation and
Telstra
’s $11 billion proposed deal to transfer its own ­customers to NBN Co.

Telstra’s biggest shareholder, the Future Fund, yesterday said it had cut its stake from 7.8 per cent to 6.76 per cent ahead of Telstra’s interim results on Thursday, at which the telco is hoping to unveil a definitive heads of agreement with NBN Co.

The Telstra deal, if approved by the regulator and shareholders, would remove the biggest competitive threat to the controversial project as Telstra would close down its copper and cable networks giving NBN Co an almost free run in the fixed-line broadband market.

But industry observers believe that the NBN’s business case will still struggle if Optus is allowed to keep operating its cable network, which passes 1.4 million homes in metropolitan areas of Sydney, ­Melbourne and ­Brisbane.

The hybrid fibre-coaxial (HFC) cable network can in some areas already offer broadband speeds of up to 100 megabits a second, the initial speeds available on the NBN, which will use fibre-optic technology.

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Traffic from Optus’s half a million cable customers would be of value to NBN chief executive
Mike Quigley
as he tries to bolster the project’s early financial prospects, which have attracted intense scepticism from analysts, the Coalition and business.

But any move by SingTel-owned Optus to shut down its cables for broadband supply would reopen the federal government to allegations that it is artificially constraining infrastructure competition by reducing consumers’ options for fixed-line broadband.

Optus, which declined to comment, is believed to want more ­certainty about the ­proposed Telstra deal, and the ­legislation surrounding the NBN Co, which is due to return to Parliament this week.

A deal between Optus and NBN Co would mollify ­Telstra, which has made clear it would be aggrieved if Optus was allowed to use its cable to compete with the NBN, given that Telstra has agreed in principle to decommission its own copper and cable networks for broadband ­provision.

Analysts have warned Telstra chief executive
David Thodey
that the company is giving up the ability to use its own HFC network to supply broadband while Optus has launched an upgrade of its HFC network. So far, Optus hasn’t been subject to any proposed regulatory constraint on it mixing and matching NBN and HFC to deliver ­broadband.

Mr Thodey intimated at Telstra’s investor day last year that its $11 billion deal is conditional on Optus ­closing its network to broadband users.

“If there was an unequal playing field created, we either need compensation or we need it dealt with. Be assured, we are very conscious of these things," he said.

SingTel will be asked whether it plans a partial float of Optus when the group issues third-quarter results on Thursday.